Heckman said his firm is avoiding TIPS.
Global Phenomenon
Disinflation may also be harder to overcome in the U.S. as price gains weaken around the world, depressing export demand and making imported goods less expensive.
European Central Bank President Mario Draghi said on Nov. 7 that the region faced the prospect of a “prolonged” period of low inflation in explaining the ECB’s decision to cut its benchmark rate by half to 0.25 percent.
Three weeks later, the European Union statistics office said consumer prices for the 17 nations that share the euro rose 0.9 percent in November from a year earlier, less than the ECB’s goal of “close to but below” 2 percent. As recently as November 2011, euro-zone inflation was 3 percent.
While the ECB, the Bank of Japan and Bank of England have all committed to programs to cut borrowing costs and spur inflation, consumer prices globally will rise 2.31 percent this year, data compiled by Bloomberg show. That would be the least since 2009 and the third straight year inflation has slowed.
First Loss
Inflation-linked bonds globally have fallen 4.4 percent and are poised for the first annual loss on record, according to Bank of America index data.
“There was a notion out there with all these reserves being created, with all this money being printed that sooner or later there has to be an inflationary impact,” said Mitchell Stapley, the Grand Rapids, Michigan-based chief investment officer at ClearArc Capital Inc., which manages $15 billion. “Today, there is just not the concern about the inflationary backdrop that you need to have to drive demand” for TIPS.
Stapley said ClearArc, the asset-management arm of Fifth Third Bank, has reduced the amount of TIPS that its bond funds hold by about 80 percent.